Westerners often underestimate how good China’s private businesses are at swiftly adapting to consumer tastes.
That’s why the news of Macy’s (M) closing 100 stores, or about 15% of its total, seems tame from a Chinese perspective.
Macy’s relevance, even if it is a most storied department store brand, is fading amid the rise of Amazon.com (AMZN) and countless Brooklyn-inspired startups peddling online luxury underwear and entire outfits.
A similarly popular Chinese department store chain has faced the dynamics as Macy’s over the past few years. Fewer shoppers and harsh online competition cut into traffic and profits. The Chinese brand responded by slashing a lot more than 15% of its stores
Last year Dalian Wanda Group, the mall developer owned by China’s richest man Wang Jianlin, decided to close almost half of the department stores it ran inside its larger malls, shuttering 40 of 90 locations, according to Chinese media reports. Insiders told the Chinese press that Wanda’s department stores opened after 2007 had never made a profit.
Although its push into online shopping looks like a mess, Wanda’s decision to close outdated department stores—along with flipping its $45-billion-annual-sales business from a real estate focus to services over a few short years—is the kind of decisive act that might be praised in the halls of Harvard Business School but seems near impossible for a U.S. CEO to make.
China’s startups offer more examples.
Didi Chuxing, the ridesharing leader in China, quickly came up with multiples of the services Uber offered in China after starting as a simple taxi-hailing service. These new offerings kept Didi’s market share elevated despite Uber’s rising popularity. Now Didi’s platform offers ridesharing, private buses, and even Friday night chauffeurs who drive your own car if you’ve had too much to drink. Didi’s transformation to keep up with user demands is a chief reason the startup beat its more powerful American rival.
In another example, Tencent (TCEHY) cannibalized its other services when it released its messaging app WeChat. WeChat now has 700-million-plus users.
In many ways, China, like India, has simply leapfrogged the U.S. It never had a network of fixed-line telephones, for instance, nor phone operators who needed to adapt to cellphones; it just had cellphone companies. Wanda’s history traces back to the late 1980s, while Macy’s first store dates to 1851.
Even with those advantages, many Chinese companies have still overcome the so-called Innovator’s Dilemma. When faced with meeting its consumers needs now or their needs in the future, many have been able to choose the future.
Maybe Macy’s pulls itself out of a spiral of growing irrelevance.
If it doesn’t, its downfall will almost certainly be blamed on moving too slowly in a new direction—something many of China’s private companies don’t fear.
